Lessons for Child Welfare From the Tales of Wells Fargo

ByRichard Wexler |October 6, 2016

By now most readers are familiar with the scandal involving the world’s largest bank, Wells Fargo. Under enormous pressure from management, with their own jobs and livelihoods on the line, thousands of bank employees opened accounts in the names of customers without those customers’ knowledge — so the bank could rake in fees on those accounts.

Top management rushed to scapegoat those low-level employees, firing thousands of them. But Sen. Elizabeth Warren, D-Massachusetts, among others, understood that the Wells Fargo fish rots from the head.

So does a business ethics consultant named Dov Seidman. Interviewed on NPR’s "Weekend Edition," Seidman was asked: “Do you really need to create or strengthen a culture or just tell your employees: ‘Don’t cheat the customer’?”

“You can tell the employees ‘Don’t cheat the customer,’” Seidman replied. “But … you’re paying them for selling more … You could tell somebody, ‘Be ethical, do the right thing.’ But then you pay them for how much [you sell].”

In other words, financial incentives matter.

They matter in child welfare, too.

Most of the discussion of financial incentives in child welfare deals with government incentives – the fact that states can tap into a huge open-ended federal entitlement to hold children in foster care, but there is nothing comparable for safe, proven alternatives. (And as I have argued here before, the so-called Family First Act would not really change that.)

These federal financial incentives are a serious problem – but they’re not likely to change soon. Meanwhile, there are other bad financial incentives that may easier to fix; at least in theory, since states can fix these incentives on their own.

Much of the care for children in group homes and institutions is not provided directly by governments. It’s subcontracted to private agencies. In some states, these agencies also oversee family foster homes.

Typically, these agencies are paid for each day they hold a child in care. In other words, to paraphrase Seidman: You pay them for how many kids you have and how long you keep them.

Of course the people who run child welfare agencies insist they’re nothing like a bunch of greedy bankers. After all, with some frightening exceptions, most of the agencies are nonprofits.

In one sense they’re right. Leaders of private child welfare agencies do not gather in conference rooms and rub their hands with glee, like Montgomery Burns on “The Simpsons,” at the prospect of more children coming their way.

But rationalization is powerful. Agencies convince themselves that all those children really, truly needed to be taken away and have to stay in foster care for a long, long time.

And the will to survive can induce in nonprofits a kind of greed that is as corrosive of common decency as the worst corporate behavior.

I saw this first-hand long ago when I worked in the original nonprofit sector of journalism, public broadcasting. Twice during early morning “pledge breaks,” the person seeking money told little kids to go get their parents so she could tell them an important message: If the station didn’t get enough money, she said, they might have to take away "Sesame Street."

But the role of financial incentives can be seen most clearly when they change.

By 1997, Illinois had 50,000 children trapped in foster care on any given day – proportionately the highest rate in the nation. Then the state changed the financial incentives for private agencies.

Lo and behold: The “intractable” became tractable, the “dysfunctional” became functional, and by 2004 the number of children in foster care was under 20,000. By 2014, it was about 17,000.

Some of the same people who insist financial incentives have no effect on decisions to keep children in foster care are quick to spread scare stories about how changing the incentives supposedly would prompt those agencies to send children home too soon. But Illinois operates under a longstanding consent decree, with independent monitors examining the entire system. Those monitors found that after the incentives changed and the foster-care population plummeted, child safety improved.

Illinois still has very serious problems – particularly when it comes to what happens to the children they take into substitute care. But the state places far fewer children at risk of harm, in part by using financial incentives to reduce foster care.

Other states could learn a lot from Illinois — and from the tales of Wells Fargo.

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In the adapted words of the newest Nobel Prize Winner in Literature, the Iron Range’s most insightful bard: “Ya don’t need an MBA to know which way the wind’s blowin'” The guy I purloined that line from, Bobby Dylan nee Zimmerman of Hibbing, MN…Now call the Nobel Committee back, collect!

I lost my job asking for more training when President Obama’s early 2009 White House guest Kevin Rhein who headed our business line at Wells Fargo from his NORWEST HQ restructured again when Treasury and Justice gave a wink and nod during the TARP BAIL OUT under predecessor Bush-Cheney-Paulson and allowed WF, despite valid ANTI-TRUST and ANTI-COMPETITIVE CONCERNS to acquire WACHOVIA BANCORP of Charlotte, NC and favored by Latin American narco-traffickers seeking laundering services.

Apparently previous commentors are either MBA graduates or living in a cave over the past 4 decades of both parties supporting Neo-Liberal E-CON. Yes, Neo-Cons have lined up behind the Neo-Liberals in tearing down tariffs, un- fettering capital and what they do not DE-regulate they turn over to industry’s self-regulation. In no industry moreso than in Financial Services. Search the Wikipedia page on FINRA and see how well self-regulation has worked out since Nanny and Baby Bush’s regime with the House of Clinton shifting to signing GOP de-regulation bills.

The Social Contract and our short-lived Post WW II Muddle Class went with it. Are you concerned with Good Governance (both corporate and political)? You missed the sleight of hand where the PRIVATE INTERESTS of the 1/10th of 1% have replaced the PUBLIC INTEREST by all Pay-2-Play governments regardless of party or ideology. Don’t expect corporate-captured News Media to allow much discussion on topic.

Interlocking Boards of Directors have been voting themselves more and more oligarchical Executive Compensation packages and the shareholders have facilitated this by voting to allow the merging of the short-term profit maximizing CEO job with the supposedly long-view CHAIRMAN OF THE BOARD and reconciling of vertically-integrated business line objectives of the enterprise’s long term health and stability.

As Milwaukee’s sly songwriter wiley Willy Porter wrote in a popular YouTube song, “How To Rob A Bank (Just Get Yourself Onto the Board of Directors and Fart Into A Velvet Couch)” Canadian Bruce Cockburn recorded his own ode to Neo-Liberal E-CON a decade earlier called “(Open Up A Window) Let the Bad Air Out”

Neither Senator from Wall Street made any mention of CLAW BACK when Jr Senator Clinton’s husband’s Treasury Secretary, Robert Rubin went from printing and signing paper money to bailing out the Mexican Peso for U.S. Vulture Fund and bond market investors to revolving through the House of Clinton Cabinet into the Chief Counsel job at CITI BANCORP. Ah CITI FIELD (Home of the Wall Street Mets gamboling on fields of tax-payer subsidized green) errrr CITI GROUP… Where PUBLIC SERVANT TREASURY SEC Rubin’s counsel to lame duck 2nd term President Bill Clinton after bailing out the MEXICAN PESO FOR THE BENEFIT OF U.S. VULTURE FUND and BOND MARKET INVESTORS advised further DE-regulation of the trans national banks by signing Neo-Con Texas GOP Senator Phil Gramm’s repeal of the Great Depression’s Glass-Stegall Act as the Gramm-Bliley-Leach bill, then later re-named the Bank Modernization Act of 1998-99.

Ahhh…Arch Conservative Texas Senator Phil Gramm’s next Bank Job? He and his wife accepted velvet couched positions with UNION BANK OF SWITZERLAND (UBS) where Phil Gramm sat on the Board of Directors as the list of U.S. tax evaders got leaked and caused the PATRIOTIC GRAMMS OF TEXAS only mild discomfort. Look at Robert Rubin’s Wikipedia page to see the whopping more than $126 Million that he rewarded himself a very lucrative PRIVATE SECTOR decade later from the Bush-Paulson TARP tax-payer bail-out in Executive Compensation for leading CITI CORP to collapse and the need for bail-out. 5300 underpaid anxiety-ridden and hand sanitizer drinking Wage Slaves received no cash or stock option bonuses, many already needing SNAP food stamps to cover their families’ expenses were fired by CEOCHAIRMAN OF THE BOARD STUMPF (rhymes with Mein Trumpf).

When I spent 11 years as an employee in the Executive Office for Wells Fargo Card Services under previous CEOChairman of the Board Dick Kovacevich the shareholders (many of whom are also employees) had opportunities to vote on whether the CEO could also serve as Chairman of the Board. Something grassroots activists in Palestine used to ask of ChairmanCEO Arafat.

If the CEO could also serve as Chairman of the Board who was charged with taking the enterprise’s LONG VIEW? Yes we ain’t got no Bananas nor much of a Republic left in these Globally Traded United States, but our only trading surplus sector left is HIGH TECH which is a result of DADDY WARBUCKS and our military-industrial public subsidies and subsequent war-profiteering exports.

That is a recipe not for Global Stability, but PERPETUAL INSTABILITY now including our own THIRD WORLD HOLLOWED OUT EMPIRE. Like Chomsky always noted of Washington socio-E-CON: “Socialize the costs and risks, while privatizing the profits!” MYLAN Epi-Pen patent & free-market pricing anyone?

AT&T looking to buy up TIMEWARNER (AOL? Don’t ask…)? See the outcomes for U.S. “informed electorate” by concentrating cartel ownership of News Media in fewer and fewer interlocking corporate boards of directors. Beezness as usual. Bayer being allowed to buy Monsanto? Verizon being allowed to buy Yahoo? These deals will increase corporate competition? No anti-trust cuz there’s no trust at all.

Both cartel political parties representing Wall Street and privileging in policy legislation INVESTORS over WORKERS serve their PRIVATE INTEREST with nothing to show for the outcomes of all their PUBLIC INTEREST policies like Global Trade. Teddy Roosevelt and the selective TRUST BUSTERS would be spinning in their saddles. Where was the Anti-Trust enforcement, where were the TRUST BUSTERS that would’ve provided for competition instead of consolidation among the handful of national banks surviving the acquisitions of Washington Mutual, Nations Bank and Wachovia Bancorp?

The latter allowed to be purchased post-TARP bail-out by Wells Fargo! Was that the stated aim by Secretary of Treasury Paulson after using our money to save these TOO BIG TO FAIL acquisition crazed ventures? Can you spell CRONY CAPITALISM?

Hey there Oregon Senator Merkley and your Senate Finance Committee cohort, check your Constituent Correspondence or Stacey back at the Po’ Town office or on your dot gov website. I’ve been trying to share with you or your staff what I learned in my 11-year tenure as the Canary in the Coal Mine working the Office of the Comptroller of the Currency (OCC) escalated complaints at Wells Fargo Card Services and Consumer Lending Executive Office in Concord, CA then in Beaverton, OR after the Norwest acquisition of Wells Fargo and their first corporate re-structuring.

Your own state’s Listener Sponsored (as opposed to corporate advertiser driven) Community Radio Station KBOO’s Public Affairs staff have been trying to get more than automated template letters from your paid staff and Sr. DEM SENATOR WYDEN’s. Lord knows you spend enough on political consultants, how’s about dropping in at the state’s Community Radio station?

Nice to see it has since passed muster with Mr Clean Capitalist Winner Warren Buffett. [About as clean as Mr Buffett’s Berkshire Hathaway purchase of Po’Town, Oregon’s most toxic polluter of water-shed PRECISION CAST PARTS. The damage only now being assessed post-acquisition can be reviewed by searching online under PORTLAND TRIBUNE headline “Johnson Creek has a PCB problem” Created on Thursday, 20 October 2016 | Written by Paul Koberstein]